The Liability Risk

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The Liability Risk

Prof Mahesh Kumar

Amity Business School

[email protected]


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Introduction Legal Liability Insurance provides protection

against financial impact of law suits.


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Basis of Legal Liability A legal wrong is violation of a persons legal

rights or a failure to perform a legal dutyowned to a certain person or to society as a

whole. Legal wrongs can be classified in three

categories:

1. Breach of contract

2. Criminal Act3. Torts or civil wrong


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Basis of Legal Liability BreachBreach ofof contractcontract involves failure, without a

legal excuse, to perform contractual duties.

CriminalCriminal actact is a legal wrong against society

that is punishable by fines, imprisonment ordeath.

TortsTorts oror civilcivil wrongwrong is a legal wrong for whichthe law allows remedy in the form of money

damages. The person who is injured orharmed (called the plaintiff or claimant) by theactions of another person (called defendant ortortfeasor) can sue for damages.


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Basis of Legal Liability Torts generally can be classified into three

categories:

1. Intentional torts

2. Absolute or strict liability

3. Negligence


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Intentional Torts Legal liability can arise from an intentional act

or omission that results in harm or injury toanother person or damage to persons

property. Examples of intentional tort include assault,

battery (touching another person withoutpermission), trespass, false imprisonment,

fraud, libel, slander and patent or copyrightinfringement.


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Absolute Liability Absolute liability or strict liability means that

liability is imposed regardless of negligence orfault (whether proved or not proved).

Example

1. Occupational injury and disease of employeesunder workers compensation law.

2. Blasting operations that injure another person

3. Manufacturing of explosives

4. Owning wild or dangerous animals

5. Crop spraying by aeroplanes.


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Negligence Negligence involves doing something a

reasonable person would not do or not doingsomething a reasonable person would do,

which results directly in some injury/ harm toanother person.

Courts define a reasonable person as one whohas normal possession of all faculties and

senses; who speaks and acts based onreason; and who is honest and moderate in allactivities.


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Elements of Negligent Act There are four essential elements of negligent

act:

1. Existence of a legal duty

2. Failure to perform that duty

3. Damage or injury to the claimant

4. Proximate cause relationship between thenegligent act and the infliction of damages.


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Existence of Legal Duty The first requirement is existence of legal duty to

protect others from harm.

Ex A motorist has a legal duty to stop at a red light andto drive an automobile safely within the speed limits. Amanufacturer has a legal duty to produce safe products.A physician has a legal duty to inquire about theallergies before prescribing a drug.

If there is no legal duty imposed by law, you cannot beheld liable.

Ex. A person may be a champion swimmer but will haveno legal obligation to dive into a swimming pool to savea two-year-child from drowning.


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Failure to Perform that Duty Examples of positive act are:

1. A driver who speeds in a resident area or runs a redlight.

2. One may drive an automobile into the rear ofanother car.

Examples of negative act are:

1. Failing to signal a turn

2. If you injure someone because you failed to repair

faulty brakes on your car3. A gas company may be held liable for a loss when it

had agreed to inspect a customer gas pipe but failedto do so.


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Damage orInjury

The third requirement is damage or injury tothe claimant. The injured person must showdamage or injury as a result of the action of

the alleged tortfeasor. Ex. A speeding car may run a red light, smash

your car and seriously injure you. Because youare injured, your car is damaged, the third

requirement of negligent act has beensatisfied.


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Damage orInjury

The amount of damages depends on severalfactors. There are three types of damageawards:

1. Special Damages2. General Damages

3. Punitive Damages


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Damage orInjury

SpecialSpecial DamagesDamages are paid for losses that canbe determined and documented, such asmedical expenses, loss of earnings or propertydamages.

GeneralGeneral damagesdamages are paid for losses thatcannot be specifically measured or itemized,such as compensation for pain or suffering,disfigurement or loss of companionship of a

spouse. PunitivePunitive DamagesDamages are paid to punish people

and organization so the others are deterredfrom committing the same wrongful act.


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Proximate Cause Relationship A proximate cause is a cause unbroken by any

new and independent cause, which producesan event that otherwise would not have

occurred. i.e. there must be unbroken chain ofevents between the negligent act and theinfliction of damages.

Example: A drunk driver runs a red light andkills another motorist would meet proximatecause relationship.


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Proximate Cause Relationship Example: Suppose person A negligently damages

person Bs car and this causes B to be late for animportant business engagement. B charges that, as aresult, a sale was lost that would have netted Rs.1 lakh.

Can B add Rs.1 lakh to claim for damages?

Carrying this example further, suppose B claims thatnot only did he lose the sale but also lost his job.Further, because of the lost job, his wife had to go towork, necessitating the expense of purchasing a second

automobile and of hiring a nanny for the children. May Balso add these expenses to his claim?


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Defenses in a Negligence Suit Some of the important defenses against

negligence are as follows:

1. Contributory Negligence

2. Comparative Negligence

3. Last Clear Chance Rule

4. Assumption of Risk


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Defenses in a Negligence SuitContributoryContributory NegligenceNegligence

If it can be shown the plaintiff's ownnegligence contributed to or led to injury

sustained, the court will not allow recovery ofdamages from the defendant under thecontributory negligence rule i.e. One mustcome to court with clean hands.

Ex : If a motorist on an expressway suddenlyslows down without signaling and is rearended by another driver, the failure to signalcould constitute contributory negligence.


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Defenses in a Negligence SuitLastLast ClearClear ChanceChance

The last clear chance doctrine is exception tocontributory negligence rule.

The doctrine states that if the defendant has a clearchance to avoid injury to the plaintiff, then the plaintiffcan collect despite having made a contribution to theloss.

Example: A morning walker who walks against a redlight is breaking the law. But if a motorist has a last

clear chance to avoid hitting the morning walker andfails to do so, the injured morning walker can recoverdamages for the injury.


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Defenses in a Negligence SuitAssumptionAssumption ofof RiskRisk

Under this doctrine, a person who understands andrecognizes the danger in a particular activity cannotrecover damages in the event of injury.

Example: A hockey player assumes the risk of beingstuck by a puck or being forcefully checked byopponents. But does engaging in this sport also implythat he assumes the risk an irate opponent will use hisstick to split open his skull? If the injured player takes

the aggressor to court, can the aggressor legitimatelyraise the assumption of risk defense?


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mputed Negligence Imputed negligence means that under certain

conditions, the negligence of one person canbe attributed to anotherEx Employer-Employee relationship where

employee is acting on the behalf of theemployer.Principal-Agent relationship where agent isacting on the behalf of the principal.The negligent act of employee/agent can be

imputed to the employer. Vicarious Liability Law, by which an

automobile drivers negligence is imputed tothe vehicle owner.


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mputed Negligence Family Purpose Doctrine is when the owner of

an automobile can be held liable for thenegligent acts committed by immediate familymembers while they are operating the familycar.

Imputed negligence may arise of jointbusiness venture.

Ex: Two brothers may be partners in a

business. One brother may negligently injure acustomer with a company car and the injuredperson sues for damages. Both partners couldbe held liable for the injury.


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Specific Applications of the Law of NegligencePropertyProperty OwnersOwners

Property owner have a legal obligation toprotect others from harm and the standard of

care owed to others depend upon the situationwhich have been recognized as that for

1. Trespasser

2. Licenser

3. Invitee


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Specific Applications of the Law of NegligenceTrespasserTrespasser

A trespasser is a person who enters orremains on the owners property without the

owners consent. The property owner does nothave any obligation to the trespasser to keepthe land in reasonably safe condition.However, the property owner cannotdeliberately injure the trespasser or set a trap

that would injure the trespasser. This alsoreferred as dutyduty ofof slightslight carecare..


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Specific Applications of the Law of NegligenceInviteeInvitee

An invitee is a person who is invited into thepremises for the benefit of the occupant.

Ex: customers in a retail store, guests in ahotel or a public meeting, mail carriers,garbage collectors etc.

It is not sufficient to merely warn an invitee of

danger; in addition, positive steps must betaken to protect an invitee from an unknowndanger and to discover unknown dangers.


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Attractive Nuisance Doctrine An attractive nuisance is a condition that can

attract and injure children.

The doctrine is based on the principles that

children may not be able to recognize thedanger involved and may be injured, and thatit is in the best interest of society to protectthem rather than protect the owners right tothe land.

In this doctrine trespassing child is consideredto be an invitee.


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Attractive Nuisance DoctrineExample:

A homeowner carelessly leaves a ladderstanding on the side of the house. A small

child climbs the ladder and fall off the roofbreaking both his legs.

A building contractor carelessly leaves thekeys in a tractor. While driving the tractor,

two small boys are seriously injured when thetractor overturns.


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Government Liability

Government can be held liable if it is negligentin the performance of a proprietary function.Proprietary functions of government include

the operation of water plants; electrical,transportation and telephone systems;municipal auditoriums and other similarmoney making activities.

Government can also be held liable withrespect to governmental functions like falsearrest, failure to arrest, failure to meet certainstandards of care, bad sewer system etc.


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Employer and Employee Relationship

Under the doctrine of respondent superior, anemployer can be held liable for the negligentacts of employees while they are acting on the

employers behalf.Ex: If a sales clerk in a sports store drops adumbbell on a customers toe, the owner ofthe store can be held responsible.


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Animals

Owners of wild animals are held absolutelyliable (strict liability) for the injuries to otherseven if the animals are domesticated.


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Parents and Children

Parents are not generally responsible for the childrenstorts. However there are several exceptions to thisgeneral rule:

1. A parent can be held liable if a child uses a dangerous

weapon such as gun or knife to injure someone.

2. The parent can be legally liable if the child is acting asan agent for the parent.

3. If a family car is operated by a minor child, the parentscan be held liable under the family purpose doctrine.

4. The parents are liable for the willful and malicious actsof children that result in property damage to others.


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Products Liability

Products liability refers to the legal liability ofmanufactures, wholesalers or retailers to persons whoincur bodily injuries or property damage from adefective product.

A manufacturer or seller of a product can be held liablebecause of

1. improper product design

2. improper assembly of the product

3. failure to test and inspect the product

4. failure to warn of inherently dangerous characteristics

5. deceptive advertising and

6. failure to foresee possible abuses or misuse of product


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Conclusions

There is a need to reform civil justice systembecause of the following defects:

1. High costs and inefficiency

2. Uncertainty of legal outcomes

3. Increase compensation awards

4. Long delays in settling lawsuits

Documents

The Liability Risk